Market Insights

Investors just got a pullback as high-flying AI stocks retested key levels.

The S&P 500 just finished a volatile week, dropping as much as 3.1 percent between Friday, October 31, and midday on Friday, November 7. However buyers appeared in the last four hours of trading, driving the index back to a loss of 1.6 percent. Selling focused on AI-related groups like semiconductors, giving the Nasdaq-100 its worst week since April (down 3.1 percent).

No single headline triggered the weakness. Prices simply bled lower following months of steady upside. In some cases investors “sold the news” after companies reported strong earnings. That was especially true for high-multiple growth stocks like Palantir Technologies (PLTR) and Advanced Micro Devices (AMD).

Quarterly results were positive overall, according to FactSet. The research firm noted that 82 percent of S&P 500 members have beaten estimates so far this reporting season — the most in four years. More than three-quarters of the index has surpassed revenue numbers.

Tesla (TSLA) shareholders voted to approve Elon Musk’s record-setting compensation package. The arrangement would pay him almost $1 trillion if he reaches targets including stock appreciation of about 450 percent.

Last week also saw the launch of Qnity Electronics (Q), a provider of materials used in semiconductor production. Management quickly raised its outlook based on strong demand from AI. Q, spun off from chemical maker DuPont (DD), immediately joined the S&P 500 index.

Shutdown and Pessimism

There was a lack of economic data because of the ongoing government shutdown. Key reports like jobless claims and non-farm payrolls were skipped.

Non-government data was mixed. ADP’s private-sector payrolls report and the Institute for Supply Management’s service-sector index were higher than expected, but manufacturing missed.

Two readings were especially poor (although neither historically have a big impact on stocks). Human-resource consultancy Challenger, Gray & Christmas said layoffs rose 183 percent in October from September. The next day, consumer sentiment plunged to its lowest level since the pandemic. Americans expressed worries about employment, prices and the government shutdown.

Most justices on the U.S. Supreme Court expressed at least some doubt about President Trump’s tariffs. However it isn’t clear when they will rule on the case.

Speaking of tariffs, several companies reported impacts from the duties. The list included Taser maker Axon Enterprise (AXON), appliance maker Whirlpool (WHR), equipment maker CNH (CNH) and e.l.f. Beauty (ELF). Pinterest (PINS) said tariffs hurt online shopping and advertising revenue.

AI Boosts Earnings

AI continued to benefit a variety of companies. Datadog (DDOG) hit a four-year high after results beat estimates and management cited demand for AI-related tools. Expedia (EXPE) jumped to a new record on strong earnings and the rollout of AI tools like trip-planning assistants and conversational search.

Fiber-optic companies including Lumentum (LITE) and Coherent (COHR) continued to benefit from AI’s demand for networking gear.

DigitalOcean (DOCN), which rallied after earnings in August, jumped again last week after quarterly results surprised to the upside. The company helps smaller companies build AI products and services. Unity Software (U), a provider of AI-powered advertising tools, also climbed.

Kenvue (KVUE) had the biggest gain in the S&P 500 last week after accepting a takeover by Kimberly-Clark (KMB).

DD climbed after spinning off Q. Henry Schein (HSIC) had its biggest weekly gain since the pandemic after its transformation plan resulted in strong earnings. The dental supplier also updated an agreement letting KKR increase its ownership stake.

Hotel stock Marriott (MAR) rallied 12 percent, its biggest weekly gain in five years, thanks to growing demand in Asia. It follows a similar trend as casino operator Las Vegas Sands (LVS), which reported on October 23.

All told, solar energy, Brazilian stocks, airlines and gold miners were the strongest industries. Energy, consumer staples and health care were the top-performing sectors, according to TradeStation data.

Super Micro Slides

Super Micro Devices (SMCI) fell after earnings and revenue missed estimates. The maker of AI servers faces margins pressure as competition increases. DoorDash (DASH) fell after saying it would spend more to upgrade its platform. Zoetis (ZTS) and Norwegian Cruise Line (NCLH) fell on weak results.

Technology and consumer discretionaries were the worst-performing sectors overall last week.

Overall it was the opposite of the previous week, when a narrow set of AI-related companies led the market higher.

Despite the weakness in tech, hardware companies like Micron Technology (MU), Western Digital  (WDC), Seagate Technology (STX) and SanDisk (SNDK) continued to rise.

Charting the Market

Last week’s pullback in the S&P 500 brought the S&P 500 back to its 50-day moving average for the first time in 131 trading sessions. That was the longest streak above the 50-day MA since 2007.

The index tested and held its lower Keltner channel, which may suggest prices reached the edge of a typical range.

Friday also saw the S&P probe lower levels before recovering. The resulting “hammer” candlestick is a potentially bullish reversal pattern.

Some weekly levels were in play as well. The index tested closes from October 3 and October 17, followed by a rebound above both. That may suggest buyers were active on the pullback.

S&P 500, daily chart, with select patterns and indicators.

The Week Ahead

This week has few events, especially because the government shutdown continues to delay the release of economic data. News resulting from the shutdown — especially announcements on air travel — could have some impact on stocks.

CoreWeave (CRWV), Barrick Mining (B) and Paramount Skydance (PSKY) announce quarterly results today.

Tomorrow brings Nebius (NBIS), Oklo (OKLO), Beyond Meat (BYND) and Sea (SE).

Cisco Systems (CSCO) is the big name on Wednesday afternoon.

Thursday features crude oil inventories (pushed from Wednesday because of Veterans Day). It’s the busiest session of earnings:

• Premarket companies include Walt Disney (DIS), Canadian Solar (CSIQ) JD.com (JD).
• Applied Materials (AMAT) is the big name in the afternoon.